In the Matter of the Complaint Against GILLES J.BITBOL KATHERINE BITBOL and A.MICHAEL D.NAUJOKATH d/b/a ION PUBLISHING INC. WORLD TELEX EDITION and INTER AMERICAN PUBLISHERS, INC. (IPI) Post Office Box 01-5569 at Miami, FL 33101 and ATLAS PUBLISHING, INC. and THE WORLD WIDE TELEX DIRECTORY Post Office Box 344320 at Coral Gables, FL 33114 P.S. Docket No. 12/158; 08/24/82 Cohen, James A. APPEARANCE FOR COMPLAINANT: H. Richard B L U WHefner, Esq. en A. Kilgrow, Esq. Law Department United States Postal Service Washington, DC 20260 APPEARANCE FOR RESPONDENT: A H 1 M ndrew C. Hall, Esq. all & Hauser, P.A. 401 Brickell Ave., Suite 200 Miami, FL 33131
Complainant has appealed from the Initial Decision of an Administrative Law Judge dismissing the Complaint which alleged that Respondents are engaged in the conduct of a scheme to obtain money through the mail by means of materially false representations in violation of 39 U.S.C. § 3005, through the distribution of solicitations in the guise of invoices which are nonmailable under 39 U.S.C. § 3001(d). The Initial Decision held that, while the solicitations are nonmailable under 39 U.S.C. § 3001(d), Complainant had not established that a sufficient basis existed for the issuance of a False Representation Order under 39 U.S.C. § 3005.
On November 13, 1981, the Consumer Protection Division, Law Department, United States Postal Service (Complainant) filed a Complaint alleging that Respondents solicit goods or services through the mail in the form of bills, invoices, or statements of account due, which falsely represent that:
"(a) the amount set forth on the face of the solicitation is owing and due to Respondent,
(b) the goods or services set forth on the face of the solicitation were previously ordered by the addressee."
In their Answer, Respondents denied all of the allegations of the Complaint while affirmatively stating that "International custom and practice mandate the sending of such solicitations in order to comply with the currency regulations of other countries." At a hearing before an Administrative Law Judge, Complainant presented the testimony of Postal Inspectors Paul E. Feltman and Robert G. Hendricks. Respondents presented the testimony of A. Michael D. Naujokath and Gilles J. Bitbol. On the basis of the testimony presented and the exhibits in the record, the Administrative Law Judge concluded that Respondents do not make the representations alleged in the Complaint. He therefore dismissed the Complaint.
Complainant takes exception to Paragraphs 3 and 4 of the Initial Decision on the basis that they are not supported by the law or the facts established in the record. Paragraphs 3 and 4 set forth the Administrative Law Judge's conclusions that:
"3. The evidence in this case does not support the allegation that the recipients of the invoices mailed by these Respondents believed, or would be caused to believe, either that the amount set forth on the face of the solicitation was due and owing to Respondents or that the goods or services set forth on the face of the solicitation were previously ordered by the addressee.
4. With respect to the two allegations referred to in the preceding paragraph, the Complainant has not borne its burden of proof." (I.D. at 11).
In reaching these conclusions, the Administrative Law Judge found "uncontroverted" the testimony of one of Respondents' witnesses that, because of currency regulations in certain African and European countries, "it is common for people engaged in international businesses to use 'proforma' invoices, both to advertise and sell goods and services and to provide a basis for obtaining or sending payment from a person located in a country in which such currency restrictions are in force to a person or concern in another country." (I.D. at 9). He further found, based at least in part on testimony of Respondents' witnesses "without contradiction in this record," that letters from recipients of the "invoices" indicate that the writers were not misled by the invoice format (I.D. at 9-10).
Despite these findings and conclusions, the Administrative Law Judge determined that the invoices in question are solicitations for listings in Respondents' "World Telex Directory," which constitute nonmailable matter because they do not include the notice to recipients prescribed by 39 U.S.C. § 3001(d) or § 123.41 of the Postal Service Domestic Mail Manual (I.D. at 5-6, 10). While recognizing that the mailing of such matter "is prima facie evidence that the mailing party is engaged in a scheme or device of the type proscribed by 39 U.S.C. § 3005," he found that the prima facie case had been rebutted by Respondents' evidence and " t he evidence presented by Complainant did not really contradict, and certainly did not overcome, that presented by Respondents." (I.D. at 10).
Complainant argues that the Administrative Law Judge erred in finding that recipients of Respondents' solicitations were not misled by the invoice format. It contends that a false billing scheme will not produce the volume of complaints that other kinds of false representation cases will generate, because recipients of solicitations in the form of an invoice may conclude that the service offered has in fact been ordered, and therefore unwittingly pay the amount stated. Thus, it argues, a lack of complaints is not an indication as to whether persons or concerns are being misled by Respondents' invoices. (Comp. Brief at 7-8).
Complainant's arguments are well taken. Although, in this case, there is evidence that recipients of Respondents' solicitations have been misled, such evidence is not required in determining whether there has been a violation of 39 U.S.C. § 3005. Rather, the decisive factor is whether the mails are being used to obtain money by means of false representations. Farley v. Heininger, 105 F.2d 79, 84 (D.C. Cir. 1939), cert. denied, 308 U.S. 587 (1939); Oriental Nurseries, P.S. Docket No. 8/24 (P.S.D. March 31, 1981 at 11-12);
United States/Great Lakes Federal Surplus Directory, P.S. Docket No. 7/136 (P.S.D. March 31, 1981 at 5). This is especially true here, in view of the strong expression of Congressional concern about invoice-type solicitations which underlies 39 U.S.C. ??3001(d) and 3005(a). 1/ In determining whether false representations have been made, advertisements and other forms of solicitations are to be judged in their totality and the impression they would most probably create in the ordinary minds of those to whom they are directed. Donaldson v. Read Magazine, 333 U.S. 178 (1948); Vibra-Brush Corp. v. Schaffer, 152 F.Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958); Borg-Johnson Electronics v. Christenberry, 168 F.Supp. 746 (S.D.N.Y. 1959).
The Administrative Law Judge found the "ordinary mind" test was not controlling in this case, because competent evidence led to a conclusion contrary to that which might otherwise have been reached under this test. On review, however, it is concluded that the "ordinary mind" test is controlling and that the ordinary businessman would be misled by Respondents' invoice format.
This conclusion is supported by a review of the letters from recipients of Respondents' solicitations. At least one of the recipients did complain of Respondents' format to the Better Business Bureau 2/ (CX-C2) and another recipient termed the solicitation "misleading, because it pretends that you had already acquired a demand for payment of U.S. $590, --" (CX-K2). These and two other letters presented by Complainant were discounted by the Administrative Law Judge because of
". . . six folders containing what appeared to be hundreds of letters (Respondents' Composite Ex. 7) from clients of the Respondents, 99% of whom, similar testimony indicates, thanked the Respondents for the offer of the service (Tr. 117). Against this impressive array, the four letters relied upon by Complainant are not persuasive." (I.D. at 10).
However, the four letters introduced into evidence by Complainant are not the only evidence that Respondents' solicitations are misleading. A review of the letters in Respondents' Composite Exhibit 7 reflects that a substantial number of the recipients were confused, if not misled, as to the purpose of Respondents' solicitations.
In this regard, well over one hundred letters in the file refer to the solicitations as "invoices," many of which asked that the invoice be cancelled. The request to "cancel" the "invoice" evidences an understanding that the writers interpreted the invoices as bills, not as solicitations.
In further support of this conclusion, approximately 65 letters advise that the invoice is being returned because the recipient can find no record that an order had been placed. One of these letters, dated July 25, 1981, from a company called "Bouygues" in Saudi Arabia, states:
"We have been really surprised by your invoice dated 29/06/1981.
By a matter of fact, we are not aware of the fact that we ever ordered any publicity insertions in your 'World Telex Editions,' edition 1981-1982.
Could you please then send to the undersigned, a copy of the insertion order, which of course must have been duly signed by one of our authorized representations." 3/
Two other letters which are typical of many in Respondents' Composite Exhibit 7 evidence a lack of understanding by the recipient that the solicitations are not bills. The first letter, from P. T. Surabaya Majapahit Hotel, Indonesia, dated October 21, 1981, states:
"We have received your letters regarding to the advertising order as you attached on.
Frankly we did not ordering you to put our Hotel name into your book as advertisement (to pay U.S. $590-) or to buy your book, but just to fill your questionaire on free listing.
According to our statement above, from now on we have to clear this matter out."
The second letter, from Agencia Maritima Romano, Mexico, dated July 25, 1981, states:
"To our surprise, we received a set of books thru World Wide Telex Directory, together with your invoice for the amount of Dls. 590.00.
We would like to know who order to have our insertion 1981/1982, you never requested from us such --authorization and therefore never again."
Other letters indicate that some recipients were misled into believing that the "solicitations" were invoices for renewal of prior subscriptions. Since the testimony establishes that Respondents had not published the directory as of the time of the hearing, these recipients could not have had prior subscriptions.
Finally, one letter from PCL, South America, dated September 10, 1981, reflects the confusion and harm caused by these solicitations even where a particular company official may conclude that an offer rather than a bill is intended. It states:
"despite we are sure the 'invoice' doesn't carry any obligation with your Company, receiving this kind of documents causes some confusion over our financial Dept. . . We hope you don't send us this papers anymore. Finally, we bag your pardon, for the roughness of these words but we're sure of your comprehension . . ."
These letters rebut Respondents' testimony that those engaged in international business recognize such so-called "pro forma" invoices as offers rather than bills.
Based on the foregoing analysis, it is concluded that Respondents' letters support, rather than rebut, the statutory prima facie case. Furthermore, this statutory prima facie case is not rebutted by Respondents' evidence of foreign currency regulations regarding international transfers of funds (I.D. at 8) which alleges make the use of "pro forma" invoices commonplace and well understood. First, as Complainant correctly states, "where the mails are being used to project a scheme that may result in obtaining money from the public by means of false statements there is a violation of 39 U.S.C. § 3005 regardless of what the laws of a foreign nation may be" (Comp. Brief at 9). Further, as Complainant argues, the record establishes that only certain countries have such regulations. Thus, in many countries there are no regulations which might abate the confusing nature of Respondents' solicitations. Finally, insofar as these regulations merely require some evidence of a desire to place an order, compliance with the notice requirements of § 3001(d) should not pose a problem for Respondents and would avoid the obvious confusion evidenced by letters from recipients residing in a number of different countries.
Respondents argue that this appeal is limited to the issue of whether substantial evidence exists to support the Initial Decision. However, Respondents confuse the courts' role in reviewing final agency decisions with that of the Judicial Officer in rendering the final agency decision under 39 U.S.C. § 3005. See 39 C.F.R. ??224.1(c)(4)(iii) and 952.26. In reviewing Initial Decisions issued under this statute, the Judicial Officer determines whether such decisions are supported by a preponderance of the evidence. United States/Great Lakes Federal Surplus Directory, supra, at 6; cf. Steadman v. SEC, 450 U.S. 91 (1981). A review of the record in this case, and consideration of the prima facie case established by statute, require the conclusion that Paragraphs 3 and 4 of the Initial Decision are not supported by a preponderance of the evidence. Accordingly, Complainant's appeal is sustained.
After consideration of the entire record, Complainant's exceptions, and Respondents' arguments in opposition thereto, it is concluded that Respondents are engaged in a scheme or device for obtaining money through the mail by means of materially false representations. Complainant's appeal is sustained and the Initial Decision reversed. A remedial order under 39 U.S.C. § 3005 is issued with this Decision.
1/ In this regard, in amending § 3005(a) to provide that non-mailable matter under § 3001(d) is prima facie evidence of a false representation scheme, Congress intended "to specifically include solicitations in the form of bills, invoices, or statements of account due, among the items covered by the false representation statute if they do not bear the warnings to recipients required by § 3001(d) or Postal regulations established pursuant to that section." S. Rep. No. 95-1077, 95th Cong., reprinted in 1978 U.S. Code Cong. and Ad. News at 1370. The Senate Report further notes that the purpose of the amendment "is to improve the enforcement procedures available to the Postal Service to prevent postal patrons from being victimized" by such solicitations and that "business concerns are the principal recipient of these phony invoices . . . The U.S. Postal Service, Inspection Service, recently estimated the loss by businesses to the operators of such schemes at $25 million annually. Businesses --even those which exercise sufficient bookkeeping care so as to be reasonably certain they have not been bilked --have complained of the annoyance and expense associated with what they see as a great proliferation of such phony billings in recent years." S. Rep., supra, at 1, reprinted in 1978 U.S. Code Cong. and Ad. News at 1366.
2/ While this recipient later expressed regret for making the complaint in view of subsequent knowledge regarding Respondents' activities (see CX-C2A; I.D. at 9), this does not alter the recipient's initial reaction to the invoice format.
3/ This and the other letters quoted in this portion of the Decision are included in Respondents' Composite Exhibit 7. The wording quoted is substantially as it appears in the letters.